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Moody's revises global life insurance outlook amid shift to fee-based products

Moody's has changed its outlook on the global life insurance industry to stable from negative for 2018, expecting the shift to fee-based products to ease earnings pressures from low interest rates.

The outlook reflects the rating agency's projections of healthy revenue growth for the industry amid favorable economic fundamentals. In revising its outlook for the sector, the rating agency also considered regulatory trends, which it described as manageable.

Moody's noted that life insurers are increasingly turning to the asset management sector, a "growing and low-capital generator" of fee income. However, the rating agency said it exposes insurers to specific asset management risks.

"Balance sheets are healthy, with strong regulatory capital levels, but we see rising asset risk, as insurers seek yield," Moody's Vice President Laura Bazer said.

Prolonged period of low interest rates continues to be the main risk for global life insurers, but the risk to profitability varies per market, according to the rating agency. Some markets such as the U.S., China, France and Italy face a moderate risk to profitability, while others such as Germany and Taiwan could see a very high risk to profitability.